For the third time since 2015, the Ohio Supreme Court is being asked to decide whether a Youngstown initiative to ban hydraulic fracturing used in oil and natural gas operations will be in front of city voters, reports the Youngstown Vindicator. The newspaper says attorneys representing four city residents, who back the charter amendment effort, filed a writ of mandamus with the Court against the Mahoning County Board of Elections and its four members. The filing seeks to overturn the board’s March 13, 2018 decision to keep the proposal off the city’s May 8th primary election ballot, according to the Vindicator. For more, read the full story.

Ascent Resources Marcellus Holdings LLC said it has filed for Chapter 11 bankruptcy as part of a negotiated plan with lenders to reduce about $1 billion of debt and boost liquidity, according to Reuters. The news service says the filing in the U.S. Bankruptcy Court in Wilmington, Delaware is for Ascent’s Marcellus assets, which include development rights on 43,000 acres in West Virginia, and has no impact on Ascent's Utica shale play holdings in Ohio. The company said the Marcellus and Utica assets are owned by entities with separate capital structures. For more, read the full story.

The Supreme Court of Ohio on January 30, 2018 issued an opinion in State ex rel. Kerns v. Simmers, Slip Opinion No. 2018-Ohio-256, denying a writ of mandamus seeking to compel the Chief of the Ohio Department of Natural Resources (ODNR) to commence appropriation proceedings. In this case, a group of landowners objected to ODNR’s issuance of a unitization order under R.C. 1509.28. Following the issuance of the order, the landowners appealed to the Oil and Gas Commission, and following an adverse ruling before the Commission, filed a writ of mandamus in the Ohio Supreme Court to order the Chief to commence appropriation proceedings to compensate them for an alleged unconstitutional taking of their mineral interests.

In order to be entitled to the writ of mandamus, the petitioners needed to show (1) they had a clear legal right to appropriation proceedings, (2) that respondents had a clear legal duty to commence the proceedings, and (3) the landowners had no plain and adequate legal remedy. The Court denied the writ and dismissed the landowners’ case, reasoning they should have appealed the Oil and Gas Commission’s decision to the Franklin County Court of Common Pleas. Such appeal to the common pleas court would have constituted an adequate legal remedy. The Court’s decision was unanimous, with Justice Kennedy concurring in judgment only.

The Supreme Court of Ohio issued an opinion on January 3, 2018 in Alford v. Collins-McGregor Operating Co., Slip Opinion No. 2018–Ohio–8, affirming the dismissal of the landowners’ complaint for failure to state a claim upon which relief can be granted. The landowners had sought to have the common pleas court forfeit the mineral interests of the operator under a breach of implied covenant theory.

In the case, the landowners argued that because the oil and natural gas lease at issue did not disclaim implied covenants, the operator was subject to the implied covenant of reasonable development and the “implied covenant to explore further.” The landowners said that because the operator breached these covenants, it had forfeited its rights to the minerals underlying the land. The implied covenant to "explore further" requires a lessee to conduct further exploration for minerals in different geologic formations than has been already explored to the extent a reasonably prudent operator would do so.

The Ohio Supreme Court refused to recognize that there exists an implied covenant to explore further under Ohio law. The Court partially relied on decisions from the Oklahoma and Texas supreme courts, which also refused to recognize such a covenant. The Court, instead, held that the implied covenant of reasonable development adequately protected a landowner’s interests in an oil and gas lease, and affirmed the dismissal of the landowners’ complaint. Click here for the Supreme Court’s decision.

Chesapeake Energy Corp. has agreed to pay Pennsylvania landowners $30 million to settle federal lawsuits over the company's disputed natural gas royalty payments, but the deal hinges on Pennsylvania Attorney General Josh Shapiro resolving a 2015 lawsuit filed by the state against the shale-gas producer over deductions from royalties, according to the Philadelphia Inquirer. The newspaper reports that Chesapeake's lawyers have told a federal judge in Scranton, Pennsylvania that they had reached an agreement to settle several longstanding class-action suits involving royalties. The Inquirer says the deal calls for payments to 14,000 Chesapeake natural gas leaseholders, and it allows them to "reset" their leases to clarify the terms under which they are paid royalties. For more, read the full story.

On November 30, 2017, the Sixth Circuit Court of Appeals issued an opinion in Eclipse Resources - Ohio, LLC v. Madzia, 6th Cir. No. 17-3145, 2017 U.S. App. LEXIS 24230 (Nov. 30, 2017) affirming the lower court’s grant of summary judgment to Eclipse Resources in all respects. In this case, property owner Scott Madzia had filed suit alleging breaches of an oil and natural gas lease, a subsurface easement agreement, and bad faith on the part of Eclipse for failing to perform hydraulic fracturing operations on a well on his property.

In affirming the lower court’s summary judgment, the Sixth Circuit Court held that the language of the “lease unambiguously granted Eclipse the rights to drill for and to transport oil and gas through Madzia's property;” that the subsurface easement did not modify the rights granted in the lease because the “subject matter of the lease differ[ed] from that of the easement agreement;” that Eclipse’s use of a re-used affidavit did not violate the Ohio Revised Code and this argument was waived by Madzia’s refusal to sign the affidavit -- a breach of the further assurances clause of an amendment to the lease; and that Eclipse did not act in bad faith by failing to hydraulically fracture the initial well drilled on Madzia’s property because it was Eclipse’s option to decide whether to do so under the lease.

This case is likely to affect the language that landowners and production companies negotiate when entering into oil and gas leases in the future. Click here for a Bricker & Eckler summary of the decision.

Ohio Attorney General Mike DeWine has filed suit against Rover Pipeline LLC for alleged illegal discharges into waterways during construction of a natural-gas pipeline across the state, reports the Columbus Dispatch. The newspaper says DeWine's office filed the complaint, State of Ohio v. Rover Pipeline, LLC, in Stark County Common Pleas County in Canton on behalf of the Ohio Environmental Protection Agency. The lawsuit alleges that Rover violated environmental and clean-water laws by discharging drilling fluids and sediment-laden storm water while building the pipeline, according to the Dispatch. For more, read the full story.

The Associated Press reports that a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit has upheld U.S. Department of Energy decisions approving three projects to export liquefied natural gas (LNG), including Dominion Energy's export terminal in Cove Point, Maryland that will use natural gas from the Marcellus and Utica shale plays. The news service says the Sierra Club was seeking to overturn approvals for Dominion’s terminal as well as ones in Louisiana and Texas, claiming they would increase air and water pollution and contribute to global warming. But the three-judge panel ruled in a unanimous opinion that the Energy Department fulfilled its legal obligations in approving the projects under the National Environmental Policy Act and other laws. For more, read the full story.

On October 25, 2017, the federal district court for the Northern District of Ohio issued an opinion in Lutz v. Chesapeake Appalachia, LLC, 4:09-cv-2256 (N.D. Ohio 2017) granting Chesapeake’s renewed partial motion for summary judgment concerning Lutz’s allegation of underpayment of royalties on a producing well. The leases at issue contained the following language: “The royalties to be paid by Lessee are: … on gas … produced from said land and sold or used off the premises … the market value at the well of one-eighth of the gas so sold or used, provided that on gas sold at the wells the royalty shall be one-eighth of the amount realized from such sale.” After a lengthy procedural history, the district court certified the question to the Ohio Supreme Court of whether Ohio follows the “at the well” rule or the “marketable product” rule in relation to royalty payments. The “at the well” rule states post-production costs of gas are to be shared proportionately by the working interest and royalty owners, while the “marketable product” rule states all post-production costs must be borne solely by the operator.

The Supreme Court of Ohio – in Lutz v. Chesapeake Appalachia, LLC, 148 Ohio. St.3d 524 (2016) – had declined to answer the at-the-well question, holding: “Under Ohio law, an oil and gas lease is a contract that is subject to the traditional rules of contract construction. Because the rights and remedies of the parties are controlled by the specific language of their lease agreement, we decline to answer the certified question.” After that decision, the district court held that the Ohio Supreme Court – under traditional contract construction principles – would apply the “at the well” rule to the leases at issue, and reject application of the “marketable product” rule. This case will likely affect how working interests and royalty interest holders structure oil and gas leases in the future.

A federal judge in the Western District of Pennsylvania on September 29, 2017 issued an opinion in Seneca Resources Corporation v. Highland Township, W.D.Pa. No. 16-cv-289 Erie, 2017 U.S. Dist. LEXIS 162629 (Sep. 29, 2017), granting a motion for judgment on the pleadings from Seneca Resources. The Court reviewed a Highland Township Home Rule Charter – approved by voters in a referendum in November 2017 – that banned certain hydraulic fracturing operations within the township. The Court ultimately determined that the charter was preempted by both federal law and Pennsylvania state law. Further, it held that the charter was an impermissible use of legislative powers, a violation of the company’s First Amendment rights, and a de facto violation of the company’s Fourteenth Amendment substantive due process rights.